Reason Magazine - Contributors

Giving Away the Store to Get a Store

info@reason.com (Daniel McGraw) — Sun, 01 Jan 2006 00:00:00 EST

If you're imagining an attraction that will draw 4.5 million out-of-town visitors a year, the first thing that jumps to mind probably isn't a store that sells guns and fishing rods and those brown jackets President Bush wears to clear brush at his ranch in Crawford, Texas. Yet last year Cabela's, a Nebraska-based hunting and fishing mega-store chain with annual sales of $1.7 billion, persuaded the politicians of Fort Worth that bringing the chain to an affluent and growing area north of the city was worth $30 million to $40 million in tax breaks. They were told that the store, the centerpiece of a new retail area, would draw more tourists than the Alamo in San Antonio or the annual State Fair of Texas in Dallas, both of which attract 2.5 million visitors a year.

The decision was made easier by the financing plan that Fort Worth will use to accommodate Cabela's. The site of the Fort Worth Cabela's has been designated a tax increment financing (TIF) district, which means taxes on the property will be frozen for 20 to 30 years.

Largely because it promises something for nothing--an economic stimulus in exchange for tax revenue that otherwise would not materialize--this tool is becoming increasingly popular across the country. Originally used to help revive blighted or depressed areas, TIFs now appear in affluent neighborhoods, subsidizing high-end housing developments, big-box retailers, and shopping malls. And since most cities are using TIFs, businesses such as Cabela's can play them off against each other to boost the handouts they receive simply to operate profit-making enterprises.

A Crummy Way to Treat Taxpaying Citizens

TIFs have been around for more than 50 years, but only recently have they assumed such importance. At a time when local governments' efforts to foster development, from direct subsidies to the use of eminent domain to seize property for private development, are already out of control, TIFs only add to the problem: Although politicians portray TIFs as a great way to boost the local economy, there are hidden costs they don't want taxpayers to know about. Cities generally assume they are not really giving anything up because the forgone tax revenue would not have been available in the absence of the development generated by the TIF. That assumption is often wrong.

"There is always this expectation with TIFs that the economic growth is a way to create jobs and grow the economy, but then push the costs across the public spectrum," says Greg LeRoy, author of The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation. "But what is missing here is that the cost of developing private business has some public costs. Road and sewers and schools are public costs that come from growth." Unless spending is cut--and if a TIF really does generate economic growth, spending is likely to rise, as the local population grows--the burden of paying for these services will be shifted to other taxpayers. Adding insult to injury, those taxpayers may include small businesses facing competition from well-connected chains that enjoy TIF-related tax breaks. In effect, a TIF subsidizes big businesses at the expense of less politically influential competitors and ordinary citizens.

"The original concept of TIFs was to help blighted areas come out of the doldrums and get some economic development they wouldn't [otherwise] have a chance of getting," says former Fort Worth City Councilman Clyde Picht, who voted against the Cabela's TIF. "Everyone probably gets a big laugh out of their claim that they will draw more tourists than the Alamo. But what is worse, and not talked about too much, is the shift of taxes being paid from wealthy corporations to small businesses and regular people.

"If you own a mom-and-pop store that sells fishing rods and hunting gear in Fort Worth, you're still paying all your taxes, and the city is giving tax breaks to Cabela's that could put you out of business," Picht explains. "The rest of us pay taxes for normal services like public safety, building inspections, and street maintenance, and those services come out of the general fund. And as the cost of services goes up, and the money from the general fund is given to these businesses through a TIF, the tax burden gets shifted to the regular slobs who don't have the same political clout. It's a crummy way to treat your taxpaying, law-abiding citizens."

Almost every state has a TIF law, and the details vary from jurisdiction to jurisdiction. But most TIFs share the same general characteristics. After a local government has designated a TIF district, property taxes (and sometimes sales taxes) from the area are divided into two streams. The first tax stream is based on the original assessed value of the property before any redevelopment; the city, county, school district, or other taxing body still gets that money. The second stream is the additional tax money generated after development takes place and the property values are higher. Typically that revenue is used to pay off municipal bonds that raise money for infrastructure improvements in the TIF district, for land acquisition through eminent domain, or for direct payments to a private developer for site preparation and construction. The length of time the taxes are diverted to pay for the bonds can be anywhere from seven to 30 years.

Local governments sell the TIF concept to the public by claiming they are using funds that would not have been generated without the TIF district. If the land was valued at $10 million before TIF-associated development and is worth $50 million afterward, the argument goes, the $40 million increase in tax value can be used to retire the bonds. Local governments also like to point out that the TIF district may increase nearby economic activity, which will be taxed at full value.

So, in the case of Cabela's in Fort Worth, the TIF district was created to build roads and sewers and water systems, to move streams and a lake to make the property habitable, and to help defray construction costs for the company. Cabela's likes this deal because the money comes upfront, without any interest. Their taxes are frozen, and the bonds are paid off by what would have gone into city coffers. In effect, the city is trading future tax income for a present benefit.

But even if the dedicated tax money from a TIF district suffices to pay off the bonds, that doesn't mean the arrangement is cost-free. "TIFs are being pushed out there right now based upon the 'but for' test," says Greg LeRoy. "What cities are saying is that no development would take place but for the TIF....The average public official says this is free money, because it wouldn't happen otherwise. But when you see how it plays out, the whole premise of TIFs begins to crumble." Rather than spurring development, LeRoy argues, TIFs "move some economic development from one part of a city to another."

Development Would Have Occurred Anyway

Local officials usually do not consider how much growth might occur without a TIF. In 2002 the Neighborhood Capital Budget Group (NCBG), a coalition of 200 Chicago organizations that studies local public investment, looked at 36 of the city's TIF districts and found that property values were rising in all of them during the five years before they were designated as TIFs. The NCBG projected that the city of Chicago would capture $1.6 billion in second-stream property tax revenue--used to pay off the bonds that subsidized private businesses--over the 23-year life spans of these TIF districts. But it also found that $1.3 billion of that revenue would have been raised anyway, assuming the areas continued growing at their pre-TIF rates.

The experience in Chicago is important. The city invested $1.6 billion in TIFs, even though $1.3 billion in economic development would have occurred anyway. So the bottom line is that the city invested $1.6 billion for $300 million in revenue growth.

The upshot is that TIFs are diverting tax money that otherwise would have been used for government services. The NCBG study found, for instance, that the 36 TIF districts would cost Chicago public schools $632 million (based on development that would have occurred anyway) in property tax revenue, because the property tax rates are frozen for schools as well. This doesn't merely mean that the schools get more money. If the economic growth occurs with TIFs, that attracts people to the area and thereby raises enrollments. In that case, the cost of teaching the new students will be borne by property owners outside the TIF districts.

Such concerns have had little impact so far, in part because almost no one has examined how TIFs succeed or fail over the long term. Local politicians are touting TIFs as a way to promote development, promising no new taxes, and then setting them up without looking at potential side effects. It's hard to discern exactly how many TIFs operate in this country, since not every state requires their registration. But the number has expanded exponentially, especially over the past decade. Illinois, which had one TIF district in 1970, now has 874 (including one in the town of Wilmington, population 129). A moderate-sized city like Janesville, Wisconsin--a town of 60,000 about an hour from Madison--has accumulated 26 TIFs. Delaware and Arizona are the only states without TIF laws, and most observers expect they will get on board soon.

First used in California in the 1950s, TIFs were supposed to be another tool, like tax abatement and enterprise zones, that could be used to promote urban renewal. But cities found they were not very effective at drawing development into depressed areas. "They had this tool, but didn't know what the tool was good for," says Art Lyons, an analyst for the Chicago-based Center for Economic Policy Analysis, an economic think tank that works with community groups. The cities realized, Lyons theorizes, that if they wanted to use TIFs more, they had to get out of depressed neighborhoods and into areas with higher property values, which generate more tax revenue to pay off development bonds.

The Entire Western World Could Be Blighted

Until the 1990s, most states reserved TIFs for areas that could be described as "blighted," based on criteria set forth by statute. But as with eminent domain, the definition of blight for TIF purposes has been dramatically expanded. In 1999, for example, Baraboo, Wisconsin, created a TIF for an industrial park and a Wal-Mart supercenter that were built on farmland; the blight label was based on a single house in the district that was uninhabited. In recent years 16 states have relaxed their TIF criteria to cover affluent areas, "conservation areas" where blight might occur someday, or "economic development areas," loosely defined as commercial or industrial properties.

The result is that a TIF can be put almost anywhere these days. Based on current criteria, says Jake Haulk, director of the Pittsburgh-based Allegheny Institute for Public Policy, you could "declare the entire Western world blighted."

In the late 1990s, Pittsburgh decided to declare a commercial section of its downtown blighted so it could create a TIF district for the Lazarus Department Store. The construction of the new store and a nearby parking garage cost the city more than $70 million. But the property taxes on the new store were lower than expected, as the downtown area surrounding Lazarus never took off the way the city thought it would. Sales tax receipts were also unexpectedly low. Lazarus decided to close the store last year, and the property is still on the block. Because other businesses were included in the TIF, it is impossible to predict whether the city will be on the hook for the entire $70 million. But given that the Lazarus store was the centerpiece of the development, it is safe to say this TIF is not working very well, and Pittsburgh's taxpayers may have to pick up the tab.

If businesses like Lazarus cannot reliably predict their own success, urban planners can hardly be expected to do a better job. Typically, big corporations come to small cities towing consultants who trot out rosy numbers, and the politicians see a future that may not materialize in five or 10 years. "The big buzzwords are economic development," says Chris Slowik, organizational director for the South Cooperative Organization for Public Education (SCOPE), which represents about 45 school districts in the southern suburbs of Chicago, each of which includes at least one TIF. "The local governments see a vacant space and see something they like that some company might bring in. But no one thinks about what the costs might be....They are giving away the store to get a store." Big-box retail chains such as Target and Wal-Mart seem to be the most frequent beneficiaries of TIFs. (Neither company would comment for this story, and local politicians generally shied away as well.)

Given the competition between cities eager to attract new businesses, TIFs are not likely to disappear anytime soon. "Has it gone overboard?" asks University of North Texas economist Terry Clower. "Sure....But the problem is that if a city doesn't offer some tax incentives, the company will just move down the road." According to Clower, "In a utopian world, there would be no government handouts, and every business would pay the same tax rate. But if a city stands up and says they aren't doing [TIFs] anymore, they will lose out."

Instead, it's the competitors of TIF-favored businesses that lose out. Academy Sports & Outdoors, which employs 6,500 people, has about 80 sporting goods stores in eight Southern states, including a store in Fort Worth. When the Fort Worth City Council was considering the TIF for Cabela's, Academy Sports Chairman David Gochman spoke out against the tax incentives, realizing that his company is a big business, but not big enough. "This is not a nonprofit, not a library, not a school," he said. "They are a for-profit business, a competitor of ours, along with Oshman's and Wal-Mart and others."

TIFs Have Become the Standard Handout

Al Dalton, owner of Texas Outdoors, a 10,000-square-foot hunting and fishing shop in Fort Worth, echoed the sentiment that the city was favoring one business over another. "We don't have the buying power, and we don't have the advertising dollars," Dalton said. "It doesn't make any difference even if we've got the best price in town if nobody knows about it. The deep pockets, in every way, [make] a lot of difference."

And that may be the key to understanding how TIFs are now applied: The companies with the deep pockets are able to fill them with subsidies.

The Cabela's location in Fort Worth does not fit any of the blight criteria people had in mind when TIFs were first created. The 225,000-square-foot store, with its waterfalls, multitude of stuffed animals, and wild game caf�, sits on prime property just off Interstate 35. It is a few miles down the road from the Texas Motor Speedway (which has its own TIF), and the 200,000 NASCAR and IRL fans who attend races there three times a year--not to mention the fans who come to the speedway's concerts and other special events--might want to shop at Cabela's.

The area around Cabela's is affluent and has been growing for years. A half-dozen shopping centers nearby were on the drawing board well before the TIF was considered. Within a five-mile radius of the hunting/fishing megastore, 10,000 new homes have been built since 2000. That same area is expected to grow by 20,000 people in the next two years.

But the argument against the "but for" assumption is not being heard. In 2004 a state judge threw out a lawsuit against the Cabela's TIF by a Fort Worth citizens' group that claimed blight was never proven, and that the city was misusing TIFs in a prosperous area that needed no tax breaks for future development. The blight designation came from a pond and stream on the property. It was an odd designation, given that the property is in a prime development area and ponds and streams are not what one would classify as blighted.

The press releases and newspaper articles about the new Cabela's emphasize that the store is going to draw more people to Texas than visit the Alamo (the studies were done by Cabela's). The press release never mentions that a Bass Pro Shop store, part of a chain almost identical to Cabela's, is just 10 miles down the road. While Cabela's was negotiating its TIF with Fort Worth, it was also negotiating a TIF with the city of Buda, 120 miles away, outside of Austin. Cabela's got about $20 million from Buda, and the same tourist claims are being made there. If each Texas store is going to draw 4.5 million tourists, as the chain claims, that means 9 million people will be coming to Texas every year just to visit the two Cabela's stores.

"The notion that a hunting store would draw all these tourists is ridiculous," says Greg LeRoy. "But what is even more ridiculous is cities thinking that tax breaks are the primary reason businesses relocate or expand in certain areas. There are so many other factors at play--transportation costs, good employment available, housing costs and quality of life for executives--that the tax breaks like TIFs aren't very high up on their priority list. But these corporations are asking for them--and getting them--because everyone is giving them out. TIFs have become the standard handout, and the businesses have learned how to play one city off the other. Businesses would be stupid for not asking for them every time."

If TIFs continue to multiply at the present rate, we may see the day when every new 7-Eleven and McDonald's has its own TIF. That prospect may seem farfetched, but it wasn't too long ago that cities wouldn't even have considered giving up tens of millions of dollars in exchange for yet another store selling guns and fishing rods.�

Demolishing Sports Welfare

info@reason.com (Daniel McGraw) — Sun, 01 May 2005 00:00:00 EDT

When Dallas Cowboys owner Jerry Jones asked Arlington, Texas, voters to pay for a fancy new stadium last November, he did not call the classic plays from the sports welfare handbook. He could not say that America's Team needed a state-of-the-art facility to compete, since Texas Stadium (in the Dallas-adjacent suburb of Irving) has more luxury suites than any other in the National Football League, and the Cowboys won three Super Bowls in the 1990s. He could not say he was financially strapped, since his franchise ranks sixth in the NFL in profits and second in revenue, according to Forbes magazine. Most important, he did not use the team owners' favorite and most effective threat--to move to a new city--because the Cowboys have always had very strong local fan support; the Dallas�Fort Worth media market is the fifth-largest in the country, and Dallas Cowboys is a powerhouse global brand name.

But Jones had three key deadlines to beat. His lease in Irving was scheduled to run out in 2009, so a new stadium deal needed to be done quickly. Electorally speaking, there was no better time to pass a tax increase than during the high-profile presidential vote of 2004; special elections usually draw low turnouts, and the anti-tax older folks show up in droves. But perhaps the most important deadline of all loomed in 2005, when the window for public financing of sports stadiums in the United States may be slammed shut by two court decisions expected to be handed down during the year.

Kelo v. New London, which the Supreme Court is scheduled to rule on by summer, could decide once and for all when or even whether governments have the right to use eminent domain to acquire private property for the benefit of private businesses. Meanwhile, Hamilton County v. Cincinnati Bengals Inc., which is being heard in federal court in Cincinnati, is challenging football's federal anti-trust exemption, forcing all NFL teams to open their closely guarded books, and arguing that the Bengals' demand of build-it-or-we-can't-compete is tantamount to fraud.

Jones' P.R. people swear the lawsuits were not on his radar screen. But sports business specialists around the country say these two cases could bring the taxpayer-financed stadium-building boom of the last 15 years to a merciful halt. For whatever reason, the Cowboys' flamboyant owner convinced the Arlington City Council in August 2004 to rush hikes in sales, rental car, and hotel taxes onto the November 2004 ballot. He then unleashed a mass media blitz starring old Cowboys heroes such as Roger Staubach and Troy Aikman, spending more than $5 million in all--an extremely high amount for a local election, even in the high-stakes stadium game.

The tax hikes passed 55 percent to 45 percent, and the Cowboys will move into a new retractable-roof stadium in 2009. But it could be the last deal of its kind. On the same day Jones received his gift, voters in Kansas City and St. Louis rejected similar measures to fund sports facilities. Since then, Washington, D.C., has agreed to build a new stadium for the relocated Expos baseball team (now the Nationals), but its city council insisted that it be financed with a significant amount of private money. Public sentiment may finally be turning.

From 1990 to 2003 there were 66 major construction and renovation projects for professional sports stadiums and arenas in the U.S., costing $17.3 billion, according to the League of Fans, a sports welfare watchdog group founded by Ralph Nader. Sixty percent of the funding, or an estimated $10.3 billion, came from the public purse. With the economy and stock market no longer booming, and with the public becoming more skeptical about the rosy economic claims of billionaire team owners, the era of easy money already was drawing to a close. Now the two court cases are poised to determine whether the fund-raising tactics of professional sports teams and their local boosters are even legal.

The Right to Take

Technically, the eminent domain case before the Supreme Court has nothing to do with sports. The high court is hearing a lawsuit involving a New London, Connecticut, real estate project, in which the city agreed to tear down a neighborhood so developers could build a condominium complex and office park. No claim of blight was involved. The city said the development was a "public use," as required by the U.S. and Connecticut constitutions, because it would generate new tax revenue. Several property owners refused to sell. The Supreme Court will decide if they have to.

The Court has rarely visited the eminent domain issue. In 1954 the justices ruled that a neighborhood deemed "blighted" could be torn down and redeveloped if the local government had a better use for it. There have been several more decisions since then, but most have been very narrow in scope.

Meanwhile, the use of eminent domain has mushroomed. The Institute for Justice, the nonprofit law firm that is arguing the New London case before the Supreme Court, has documented more than 10,000 cases between 1998 and 2002 in which local governments have transferred or threatened to transfer property from one private party to another. Blight is no longer the issue; the question now is simply whether the deal helps the local economy in some way.

Sports owners have long used eminent domain as a way to acquire property cheaply. Sports economists estimate that half of the post-1990 stadium and arena construction has involved eminent domain--and even when it wasn't invoked, it was understood that condemnation could be a last resort if the teams encountered stubborn landowners.

One of the most famous eminent domain cases involved the Cowboys' future home of Arlington, where baseball's Texas Rangers, at the time owned by George W. Bush, convinced local voters to approve a 1991 tax increase that helped build a new $191 million stadium. The city of Arlington used eminent domain to acquire the property from hundreds of private owners, claiming that the stadium was a "public use," just like highways, schools, or government buildings. Several property owners were lowballed, and court decisions increased their take. (The city, not the team, was responsible for the larger payments. The compensation for one 13-acre plot was increased from $877,000 to $5 million, for example.)

The stadium clearly benefited the Rangers' owners more than anyone else: Bush turned his initial $600,000 investment into $15 million when the team was sold in 1999. But it has produced little of the promised economic benefit to Arlington, and there has never been a real "public use" factor aside from baseball fans' paying their money to see games.

Opponents of stadium deals argue that teams and local governments are getting around the public use issue by placing the stadium or arena in the ownership of a "public sports authority." The property is then tax exempt, and the teams pay nominal rent that is often less than they would have owed in property taxes. The lease arrangements are often lopsided in favor of the teams; many, for instance, allow the franchises to move after a certain time if revenues do not hit projections. This threat to pull stakes and run gives teams strong leverage to renegotiate. If the sports facility were privately owned, there would be no lease to haggle over, and the team would be less willing (and able) to leave.

Without eminent domain, acquiring enough property for a stadium could become expensive. A handful of property owners could hold up an entire complicated deal. "If the court makes the ruling that this is not a valid use of eminent domain, there will be some problems," says Scott Powe, a law professor at the University of Texas. "Huge problems. No doubt, there will be lots of litigating."

In resolving the Connecticut case, the Supreme Court is expected to decide whether the promise of local economic benefits is enough to justify the use of eminent domain, and whether local governments have to prove such benefits are likely. If the Court requires such evidence, stadium boosters will be in serious trouble.

During the last 15 years, economists such as Stanford's Roger Noll, Smith College's Andrew Zimbalist, and Cleveland State University's Mark Rosentraub repeatedly have shot down the claim that new stadiums benefit local economies. "There is no dispute in the economic community about who gets the primary benefit from the subsidy," says Raymond J. Keating, chief economist for the Washington-based Small Business & Entrepreneurship Council and an expert on sports facility financing. "It is very clear a ruling against how eminent domain is now used will change some of the issues used by local government and teams in making their case for public financing of sports facilities."

Rosentraub estimated Arlington would lose roughly $235 million over 30 years as a result of the new Cowboys stadium, a far cry from the city's (and team's) projected $7 billion gain over the same period. (The raised taxes for the stadium would actually take spending money out of the local economy.) Local businesses tend to be largely unaffected, Rosentraub has found, because teams attempt to control almost all of their fans' entertainment spending, including shopping and dining. This leaves little room for the promised spillover growth around the stadium.

"The reason you build new facilities is to bring in that consumption," Rosentraub says. "That's why in the absence of a plan for an overall development of any district, the 'Disneyfication' aspect works against you. People drive to games, and those that don't eat at the ballpark usually eat at their favorite restaurant--not necessarily in the city where the stadium is located--and have generally well-defined consumption patterns."

Without a spillover effect on the neighborhood, owners and cities would have to scramble to justify using eminent domain. "They would have to prove a defined public use and benefits that go to the community," Keating says. "Obviously the clear benefits go to the team owners and the players."

Kelo v. New London could have a sweeping impact not just on sports but on how local governments arrange deals for shopping malls, big-box retail outlets, housing developments, and more. If the Supreme Court restricts the use of eminent domain, private developers and sports owners will have a much harder time acquiring land and negotiating sweetheart leases with quasi-public landlords. If the high court decides a flimsy promise of economic benefits is enough to justify condemnation, it may signal a new building boom. Or the whole question could be tabled until another, more definitive lawsuit comes along.

Monopoly Powers?

The Cincinnati Bengals case is simpler. Basically, the Hamilton County commissioners claim the team they built a stadium for--and the league that oversees the team--cheated them out of $600 million. One of the most controversial pieces of evidence is the Bengals' win-loss record: The team said it needed more money to be more competitive, but the Bengals still stink.

The Bengals moved into their new publicly funded facility in 2000. Local voters had approved a half-cent county sales tax hike in 1996, and the stadium complex--one for the Bengals, one for baseball's Reds--cost $750 million. There was a $210 million cost overrun, which the county was forced to pay.

The new address did not produce the promised improvement on the field. In the five seasons prior to moving in, the Bengals' record was a lousy 29-51. For the first five seasons after, it was an even worse 28-52. The Hamilton County commissioners say the team told voters they would have to pay for a new stadium if they ever wanted a Super Bowl championship, an assertion the lawsuit claims violated anti-trust laws. Because the number of professional football teams is artificially limited, Hamilton County argues, the NFL and the Bengals improperly used monopoly powers by threatening to move to another city unless the stadium was built. Because the NFL has the most shared revenues of any professional sports league--and a hard salary cap that limits pay for players--every team is theoretically profitable and should be equally competitive.

The lawsuit is designed to drive the Bengals and the league back to the bargaining table. Like most stadium deals, the Bengals have a tiny annual lease payment (about $1 million), and they keep all revenues, even for nonfootball events. Because sales tax receipts have declined, the county's bond repayment, initially scheduled to take 23 years, is now expected to take 35. According to sources close to the lawsuit, the county wants the Bengals to pay about $200 million to keep the bond payments more in line with the original plan.

"You can't use your monopoly status purely for driving up your profits," says Hamilton County Commissioner Todd Portune. "That was the business plan of the NFL, and they have used their monopoly status illegally, we believe. All the evidence we have since uncovered shows that false statements were made by both the team and the league. The team was financially stable. There was no real talk behind the scenes of moving the team to another city. But the Bengals and the NFL perpetuated these lies to take money from the taxpayers and...to make lots of money for a private business."

That, Portune contends, was illegal. "Congress has laws in place that prevent the public from being taken advantage of by private businesses by using their monopoly powers," he says. The Bengals, he concludes, should "come back to the bargaining table and remedy how disproportionate the benefits were to the team and the league, vs. the cost to the taxpayers."

Neither the Bengals nor the NFL would comment on the case. But the suit is already having effects on teams. U.S. District Judge S. Arthur Spiegel has ordered the NFL and all its teams to show their financial books to Hamilton County's lawyers. The NFL has long avoided opening up its books, and the possibility of having municipalities around the country be privy to the league's real financial health would almost certainly make it harder to sell stadium deals in the future.

Still, the Hamilton County case is fraught with problems for the plaintiffs. The Bengals and the NFL can claim that since voters properly approved the bond, it is not open for renegotiation. The league also argues that teams with more revenues from luxury boxes can sign better players by having the funds for signing bonuses. And the NFL has always maintained that it is not 31 separate businesses but a single, 31-branch business--one that can't be a monopoly because it competes for entertainment dollars in every market.

"With all these cases, it just depends on the decision," says Jeffrey Kessler, a New York lawyer who specializes in antitrust cases. "If the decision is that the league violated laws, and the league is punished for it, it could have a huge impact. But I seriously doubt that a court ruling in a case like this would do things like open the door for unlimited franchises. However, a decision against the league and the teams might change how teams deal with cities and local government in setting up their stadium deals."

The Turning Point?

The stadium deal for Jerry Jones and the Dallas Cowboys is weighted heavily on the side of the team. The Cowboys emphasized during the tax initiative campaign that they were putting up half the money for the stadium--$325 million--but that isn't quite true. While the city will use the new taxes to retire its side of the debt, Jones will be able to slap his own 10 percent "tax" on tickets and a $3 tax on parking to retire his side. This will amount to about $10 million a year, or $300 million over 30 years.

But that's hardly the limit to Jones' new revenue streams. He'll also get 95 percent of the corporate naming rights revenue for the new facility, which could be worth $250 million to $350 million. That's extra money, since the team's current home, Texas Stadium, has no corporate naming contract. Jones could also earn more than $100 million by selling personal seat licenses (priority rights for buying season tickets), and the NFL is giving the Cowboys a $100 million loan they don't have to pay back.

So before he even sells a ticket or luxury box or hot dog or beer, Jones will be up about $800 million. Take away the $325 million, and he is still ahead $475 million. Since studies have shown NFL teams usually double their profits in new digs, Jones' estimated annual take of $40 million could balloon into an additional $1.2 billion over the life of the 30-year deal.

The city of Arlington never asked to see the Cowboys' books before deciding to put the issue before voters. As with the Texas Rangers stadium before it, eminent domain likely will be invoked to assemble land for the football stadium; the Arlington City Council already has threatened to use it if any property owners decide to hold out. The city has claimed the area where the stadium will be built is blighted and full of crime, neither of which is true; the local housing prices and crime rates are about average for the city.

Such spurious claims in the service of forcing small property owners to sell to larger ones have become all too common. If the Supreme Court requires the justifications to be even slightly more rigorous, and if Hamilton County succeeds merely in publicizing the NFL's notoriously secret finances, then the balance of power will shift away from the teams. And if the judges take decisive action, 2005 could be the year the public stopped lining the pockets of billionaire owners and millionaire players by paying for the places where they earn their living.